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2016 (3) TMI 1059 - ITAT PANAJI

2016 (3) TMI 1059 - ITAT PANAJI - TMI - Eligibility of deduction under sec. 80P(2)(a)(i) - Held that:- sec. 80P(2)(a)(i) of the Act following the decision of the Hon'ble Bombay High Court at Panaji in the case of M/s. The Quepem Urban Cooperative Credit Society Ltd. Vs. ACIT [2015 (6) TMI 573 - BOMBAY HIGH COURT ] wherein held that the contention of revenue that the appellant is not entitled to the benefit of Section 80P(2)(a)(i) of the Act in view of the fact that it deals with non-members cann .....

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members. - Decided in favour of assessee. - ITA No. 439/PAN/2015, ITA Nos. 440 & 441/PAN/2015 - Dated:- 18-2-2016 - N. S. Saini, AM And George Mathan, JM For the Appellant : Shri R K Pikale, CA For the Respondent : Shri K Mehboob Ali Khan, DR ORDER Per George Mathan, Judicial Member These are the appeals filed by the Revenue against the orders of the Commissioner of Income Tax (Appeals), Panaji-1 passed in ITA No.304/PNJ/14-15, dated 21/08/2015 and ITA Nos. 354 & 355/CIT(A) PNJ-1/14-15, date .....

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ment Year 2008-09. It was claimed that the society is entitled to deduction under sec. 80P(2)(a)(i) as it was a Cooperative Society carrying on the business of banking or providing credit facilities to its members. However, the claim of the assessee for deduction under sec. 80P(2)(a)(i) was rejected by the Assessing Officer in the order passed under sec. 143(3) of the Act on the ground that the assessee was a cooperative bank, and hence, not entitled to claim deduction by virtue of sec. 80P(4). .....

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der the Co-operative Act. The appellant is claiming deduction of income earned on providing credit facilities to its members as provided under section 80P(2)(a)(i) of the Act. It is appellant's case that, it is not carrying on the business of the banking. Consequently, not being a co-operative bank the provisions of Section 80P(4) of the Act would not exclude the appellant from claiming the benefit of deduction under Section 80P(2)(a)(i) of the Act. However in terms of Section 80P of the Act .....

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ulation Act. Section 5(ccv) of the Banking Regulation Act defines a primary cooperative bank to mean a cooperative society which cumulatively satisfies the following three conditions: 1) Its principal business or primary object should be banking business of Banking, 2) Its paid up share capital and reserves should not be less that rupees one lakh. 3) Its bye-laws do not permit admission of any other cooperative society as its member. It is accepted position that condition No. (2) is satisfied as .....

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king Regulation Act defines banking to mean accepting of deposits for the purpose of lending or investment, of deposit of money from the public repayable on demand or otherwise. The impugned order juxtaposes the above definition with the finding of fact that the apellant did deal with non members in a few cases by seeing deposits. This read with Bye law 43 leads to the conclusion that it is carrying on banking business. This fact of accepting deposits from people who are not members has been so .....

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the impugned order as it is not found in Bye law 43. It is undisputed that the transactions with non members are insignificant/miniscule. On the above basis it cannot be concluded that the appellant's, principal business is of accepting deposits from public and therefore it is in banking business. In fact, the impugned order erroneously relies upon bye-law 43 of the society which enables the society to receive deposits to conclude that it can receive deposits from public. However, the impugn .....

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bject clause of the appellant, which has 24 objects but thereafter draws no sequiter to conclude that the primary object is banking. Consequently there is no occasion to deal with the same as that is not the basis on which the impugned order holds that it is a Primary Cooperative bank. In the above view, the alternative contention of the appellant that it is not in the business of Banking as the sine quo non to carry on banking business is a licence to be issued by the Reserve Bank of India, whi .....

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the society. Thus there was a bar but the same was amended w.e.f. 12 January, 2001 as to permit a society to be admitted to the membership of the society. Therefore for the subject assessment years there is no prohibition to admitting a society to its membership and one of three cumulative conditions precedent to be a primary cooperative bank is not satisfied. However the impugned order construed the amended clause 9(d) of the appellant's bye laws to mean that it only permits a society to be .....

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ve registered under the Co-operative Act. Besides the qualifying condition 3 for being considered as a Primary Cooperative Bank is that the bye laws must not permit admission of any other cooperative society This is a mandatory condition i.e. the bye laws must specifically prohibit admission of any other cooperative society to its membership. The Revenue has not been able to show any such prohibition in the bye laws of the appellant. Thus even the aforesaid qualifying condition (3) for being con .....

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of Ms. Dessai, learned Counsel for the revenue that the appellant is not entitled to the benefit of Section 80P (2)(a)(i) of the Act in view of the fact that it deals with non-member cannot be upheld. This for the reason that section 80P(1) of the Act restricts the benefits of deduction of income of co-operative society to the extent it is earned by providing credit facilities to its members. Therefore, to the extent the income earned is attributable to dealings with the non-members are concern .....

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lant and against the respondent-revenue. In view of the decision of the Hon'ble High Court, the AO is directed to allow the deduction u/s.80P to the appellant. The appeal is allowed." 5. The Departmental Representative relied on the orders of the Assessing Officer. He could not point out any specific error in the above quoted orders of the Commissioner of Income Tax (Appeals). The Commissioner of Income Tax (Appeals) has allowed the claim of deduction under sec. 80P(2)(a)(i) of the Act .....

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